UNIVERSITI PUTRA MALAYSIA

NEGAR JAMALI

FK 2012 104

FACTORS INFLUENCING THE LEVEL OF ELECTRONIC COMMERCE AMONG CENTRAL IRANIAN SMEs

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FACTORS INFLUENCING THE LEVEL OF ELECTRONIC COMMERCE

AMONG CENTRAL IRANIAN SMEs

By

NEGAR JAMALI

Thesis submitted to the School of Graduate Studies, Universiti Putra Malaysia, in

Fulfilment of the Requirements for the Degree of Master of Science

July 2012

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DEDICATIONS

I dedicate this thesis to my parents, Abdullah Jamali and Tayebeh Samavi, your essence

is in everything I accomplish.

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Abstract of thesis presented to the Senate of Universiti Putra Malaysia in fulfilment of

the requirement for the degree of Master of Science

FACTORS INFLUENCING THE LEVEL OF ELECTRONIC COMMERCE

AMONG CENTRAL IRANIAN SMEs

By

NEGAR JAMALI

July 2012

Chair: Associated Professor Faieza Abdul Aziz, PhD

Faculty: Engineering

Small and medium-sized enterprises (SMEs) contribute heavily to economic growth,

social structure and employment as well as regional and local development.

Consequently, they have become a significant sector of the economy. Moving towards

globalization and rapid technological changes, including the internet and e-commerce

(EC), can offer new opportunities for SMEs. Researchers have recently discovered that

information technology-related innovations such as EC are being used increasingly by

SMEs because of their various benefits. The lack of EC research on SMEs of

developing countries is challenging because the findings of previous EC studies on

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SMEs of developed countries cannot be freely generalized to the context of SMEs of

developing countries. This lack of generalizability is due the fact that in most developing

countries including Iran, and in addition to the innate limitation of SMEs, EC adoption

by SMEs is also hindered by the quality, availability, and cost of accessing necessary

infrastructure. Therefore, the recent literature recommends that studies should be strong

enough to capture most, if not all, of the idiosyncrasies of EC adoption within SMEs of

developing countries.

To help SMEs, in particular those in developing countries, with EC adoption, this

research investigates the factors within the Technological Organizational Environmental

(TOE) framework that affect the decision to adopt EC as well as the adoption and non-

adoption of different EC tools within two hundred thirty five manufacturing SMEs in

central Iran. Furthermore the current research attempted to investigate the level of EC

adoption in SMEs. In this research a questionnaire-based survey using a quantitative

approach is conducted. The research model hypothesised ten adoption predictors within

three contexts of TOE framework; relative advantage, cost, compatibility, business size,

information intensity, support from technology vendors, pressure from suppliers/buyers,

competition, CEO’s innovativeness, and CEO’s involvement. The findings showed that

seven out of ten factors have significant positive relationships with EC adoption, which

were buyer/supplier pressure, support from technology vendors, perceived compatibility,

CEO innovativeness, perceived relative advantage, competition and information

intensity. Moreover, results showed that 57.02 percent of SMEs adopted EC. In addition

to this, there was an adoption rate of 48.50 percent for email, 29.10 percent for intranet,

and 32.90 percent for extranet/VPN, 41.04 percent for web sites, 22.39 percent for EDI,

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13.43 percent for EFT and 11.19 percent for ESCM. However, the factors that appeared

to be significant and the ones that appeared to be insignificant led to a conclusion the

weakness of the EC adoption phenomenon in Iranian SMEs. This research has

managerial implications for practitioners in Iran and internationally, and theoretical

implications for researchers who are interested in EC adoption within SMEs.

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Abstrak tesis yang dikemukakan kepada Senat Universiti Putra Malaysia sebagai

memenuhi keperluan untuk ijazah Master Sains

FAKTOR- FAKTOR YANG MEMPENGARUHI TAHAP PERDAGANGAN

ELEKTRONIK ANTARA PENGUSAHA KECIL DAN SEDERHANA DI

SENTRAL IRANIAN

Oleh

NEGAR JAMALI

Julai 2012

Pengerusi: Profesor Madya Faieza Abdul Aziz, PhD

Fakulti: Kejuruteraan

Perusahaan Kecil dan Sederhana (PKS) menyumbang sepenuhnya kepada pertumbuhan

ekonomi, struktur sosial, pekerjaan dan juga pembangunan serantau dan tempatan. Oleh

itu, perusahaan ini menjadi tunjang kepada pertumbuhan sektor ekonomi. Dalam menuju

ke arah era globalisasi dan perubahan teknologi yang pesat, termasuk penggunaan

internet dan e-dagang (EC), ianya dapat menawarkan satu peluang yang baharu terhadap

PKS. Baru-bari ini para penyelidik telah menemui satu inovasi yang berkait rapat

dengan teknologi maklumat seperti penggunaan EC yang semakin meluas disebabkan

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oleh pelbagai faedah. Kurangnya kajian EC ke atas PKS di negara-negara yang sedang

membangun menyebabkan timbulnya masalah kerana penemuan kajian EC ke atas PKS

negara-negara maju tidak boleh sewenang-wenangnya diguna pakai di negara-negara

yang sedang membangun. Kekurangan ini adalah disebabkan oleh fakta bahawa di

kebanyakan negara-negara yang sedang membangun termasuk Iran, dan di samping

kekangan had bawaan PKS, penerimaan penggunaan EC oleh PKS juga dibatasi oleh

kualiti, ketersediaan, dan kos yang diperlukan untuk mengakses infrastruktur yang

sesuai. Oleh itu, penemuan terbaharu mencadangkan supaya kajian seharusnya dibuat

dengan teliti serta merangkumi keseluruhan, jika tidak semua, idiosinkrasi penggunaan

EC ke atas PKS di negara-negara sedang membangun.

Untuk membantu PKS dalam penggunaan EC, khususnya bagi negara-negara sedang

membangun, penyelidikan ini mengkaji faktor-faktor dalam rangka Teknologi

Organisasi Alam Sekitar (TOE) yang mempengaruhi keputusan untuk mengamalkan EC,

serta gunapakai dan tidak gunapakai penggunaan alatan EC yang berbeza, di kalangan

dua ratus tiga puluh lima PKS dalam bidang pembuatan di Sentral Iran. Selain itu,

penyelidikan ini juga mengkaji tahap penggunaan EC dalam PKS. Untuk penyelidikan

ini, satu kajian berasaskan soalan kaji selidik menggunakan pendekatan kuantitatif

dijalankan. Model penyelidikan dibuat berdasarkan sepuluh hipotesis ramalan

penerimaan dalam tiga konteks rangkakerja TOE; faedah relatif, kos, keserasian, saiz

perniagaan, keamatan maklumat, sokongan daripada vendor teknologi, tekanan daripada

pembekal / pembeli, persaingan, inovasi Ketua Pegawai Eksekutif, dan penglibatan

CEO. Hasil kajian menunjukkan bahawa tujuh daripada sepuluh faktor mempunyai

hubungan positif yang signifikan dengan penggunaan EC, iaitu tekanan dari

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pembeli/pembekal, sokongan daripada vendor teknologi, keserasian yang dicapai,

inovasi CEO, penerimaan faedah berbanding, persaingan dan intensiti maklumat. Selain

itu, keputusan menunjukkan bahawa 57.02% PKS mengguna pakai EC. Disamping itu,

terdapat kadar penerimaan sebanyak 48.50% untuk e-mel, 29.10% untuk intranet dan

32.90% untuk ekstranet / VPN, 41.04% untuk laman web, 22.39% untuk EDI, 13.43%

untuk EFT dan 11.19% untuk ESCM. Walau bagaimanapun, faktor-faktor yang timbul

sebagai sesuatu yang penting dan yang tidak penting menjurus kepada kesimpulan

terhadap kelemahan dari fenomena penggunaan EC ke atas PKS di Iran. Kajian ini

mengandungi implikasi pengurusan untuk para usahawan di Iran dan di peringkat

antarabangsa, dan implikasi ke atas teori bagi penyelidik yang berminat mengguna pakai

EC di dalam PKS.

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ACKNOWLEDGEMENTS

My prayerful thanks to my Merciful God, the source of all knowledge and wisdom, Who

gives me everything I have. You have made my life bountiful.

I am heartily thankful to my supervisor, Dr. Faieza Abdul Aziz, whose encouragement,

guidance and support from the beginning to the end level enabled me to develop an

understanding of the subject.

I would like to thank my dear siblings, Iman, Neda, and Erfan for their generous

supports. Lastly, I offer my deep gratitude and grateful thanks to my parents for their

unflagging love and continued supports through my life. I deeply appreciate them, for

their patience and encouragement. They have worked actively to support our family. I

love them and I always feel proud of them.

Sincerely

NEGAR JAMALI

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I certify that a Thesis Examination Committee has met on 30 July 2012 to conduct the

final examination of Negar Jamali on her thesis entitled "Factors influencing e-

commerce adoption within Iranian small and medium-sized enterprises” in accordance

with the Universities and University College Act 1971 and the Constitution of the

Universiti Putra Malaysia [P.U.(A) 106] 15 March 1998. The Committee recommends

that the student be awarded the Master of Science.

Members of the Thesis Examination Committee were as follows:

Internal examiners:

Assoc. Prof. Dr. Zulkifle bin Leman

Department of Mechanical and Manufacturing Engineering

Faculty of Engineering UPM

Prof. Dr. Rosnah binti Mohd Yusuff

Department of Mechanical and Manufacturing Engineering

Faculty of Engineering UPM

External examiner:

Associate Prof. Dr. Shamsuddin Ahmed

Department of Design and Manufacturing Engineering

Faculty of Engineering

Universiti Malaya

Kuala Lumpur

_______________________________ Zulkarnain Zainal, PhD

Professor and Deputy Dean

School of Graduate Studies

Universiti Putra Malaysia

Date:

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This thesis was submitted to the Senate of Universiti Putra Malaysia and has been

accepted as fulfilment of the requirements for the degree of Master of Science. Members

of the Supervisory Committee were as follows:

Faieza Abdul Aziz, PhD Associate Professor

Faculty of Engineering

Universiti Putra Malaysia

(Chairman)

Norzima bt. Zulkifli, PhD

Associate Professor

Faculty of Engineering

Universiti Putra Malaysia

(Member)

BUJANG BIN KIM HUAT, PhD

Professor Dean

School of Graduate Studies

Universiti Putra Malaysia

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DECLRATION

I declare that the thesis is my original work except for quotations and citations which

have been duly acknowledged. I also declare that it has not been previously, and is not

concurrently, submitted for any other degree at Universiti Putra Malaysia or at any other

institution.

NEGAR JAMALI

Date: 30 July 2012

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TABLE OF CONTENTS

Page

DEDICATIONS ii

ABSTRACT iii

ABSTRAK vi

ACKNOWLEDGEMENTS ix

APPROVAL x

DECLARATION xii

LIST OF TABLES xvi

LIST OF FIGURES xvii

LIST OF APPENDICES xviii

LIST OF ABBREVIATIONS/ NOTATIONS xix

CHAPTER

1 INTRODUCTION

1.1 Background of the study 1

1.2 Problem statement 5

1.3 Research objectives 8

1.4 Scope of study 8

1.5 Organization of thesis 9

2 LITERATURE REVIEW

2.1 Introduction 11

2.2 Definition of Small and Medium-sized Enterprises 11

2.2.1 General Characteristics of Small and Medium-sized

Enterprises 13

2.2.2 Importance of Small and Medium-sized Enterprises 16

2.2.3 Internet users and Small and Medium-sized Enterprises 17

2.3 E-commerce Definition 18

2.3.1 Adoption and E-commerce 20

2.3.2 E-commerce and its benefits 22

2.4 Use of ICT technology in Iran 24

2.5 E-commerce adoption 24

2.5.1 Small and Medium-sized Enterprises, E-commerce and

adoption 26

2.5.2 Drivers in Small and Medium-sized Enterprises 27

2.5.3 Barriers in Small and Medium-sized Enterprises 28

2.5.4 Advantages for Small and Medium-sized Enterprises 33

2.5.5 Disadvantages for Small and Medium-sized Enterprises 33

2.5.6 E-commerce adoption models 34

2.6 Factors affecting E-commerce adoption within Small and

Medium-sized Enterprises 38

2.6.1 Technological context 39

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2.6.2 Organizational context 42

2.6.3 Environmental context 44

2.7 Theoretical background 49

2.8 Technological Organizational Environmental framework 50

2.9 Al-Qirim’s model of EC technologies adoption 54

2.10 E-commerce tools 57

2.10.1 Intranet 58

2.10.2 Extranet/VPN 58

2.10.3 Electronic data interchange 59

2.10.4 Electronic supply chain management 60

2.10.5 Electronic transaction process 60

2.11 Statistical analyses 61

2.11.1 Factor analysis 61

2.11.2 Multiple regression 66

2.11.3 Logistic regression 66

2.12 Summary 69

3 METHODOLOGY

3.1 Introduction 70

3.2 Hypotheses development 72

3.2.1 Hypotheses on E-commerce adoption within Iranian small

and medium-sized enterprises 72

3.3 Development of research model of E-commerce adoption 74

3.4 The dependent variable: E-commerce adoption 75

3.5 Constructs of research model of E-commerce adoption 76

3.6 Pilot study 78

3.7 Sample size and sampling procedure 79

3.8 Validity and reliability of the research 80

3.9 Statistical analysis 81

3.10 Summary 82

4 RESULTS AND DISCUSSIONS

4.1 Introduction 84

4.2 Descriptive analyses 84

4.2.1 Demographics and descriptive findings 84

4.2.2 E-commerce adoption status in Iranian SMEs 85

4.3 Inferential analysis: EC adoption 87

4.3.1 Validity of model 88

4.3.2 Hypothesis testing 90

4.3.3 Determinants of E-commerce technologies adoption 93

4.3.4 Discussion on E-commerce adoption model and E-

commerce applications adoption 96

4.4 Summary 105

5 CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions 106

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5.2 Implications and recommendation 107

5.3 Limitation of the study and further research 111

REFERENCES/BIBLIOGRAPHY 114

APPENDICES 135

BIODATA OF STUDENT 146